TMI Blog1970 (4) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... was confirmed by the Income-tax Appellate Tribunal. The Tribunal referred the following question to the High Court of Madras for opinion : " Whether, on the facts and in the circumstances of the case, the assessees are entitled to the benefit of section 15C(4) in respect of the dividend income received from Sri Ganapathy Mills Co. Ltd., Tinnevelly ? " The High Court answered the question in the affirmative. The Commissioner of Income-tax as appealed to this court with a certificate under section 66A(2) of the Income-tax Act. In the year ending December 31, 1963, the company had earned in its business transactions a profit of Rs. 87,184, but it had no taxable profits, for the depreciation for the current and the previous years amounted to Rs. 2,83,343 which was an admissible allowance in the computation of income under section 10 of the Income-tax Act. Since full effect could not be given to the allowance, the company was entitled to add to the depreciation for the following year, the unabsorbed depreciation of Rs. 1,96,150 under section 10(2)(vi), proviso (b). In the year ending December 31, 1934, the company earned a profit of Rs. 4,36,821 and the depreciation admissib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the tax is not payable under section 15C(1). Exemption under section 15C(1) from payment of income-tax is not related to the business profits ; it is related to the taxable profits. The language of sub-section (3) is clear : the profits or gains of an industrial undertaking have to be determined under section 10 of the Act. Even if the undertaking has earned profits out of its commercial activity, if it has no taxable profits it cannot claim exemption from payment of tax under sub-section (1) of section 15C ; and if the undertaking cannot claim the benefit under sub-section (1) the shareholders will not get the benefit of sub-section (4), for there is no dividend paid which is attributable to that part of the profits or gains on which the tax was not payable by the undertaking. The company had no taxable profit in the year of account : it did not accordingly qualify for exemption from payment of tax under sub-section (1), and since there was no such taxable profit, the dividend received by the shareholders could not be said to be attributable to that part of the profits or gains on which the tax was not payable under sub-section (1). On the plain terms of section 15C the shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15C(1) and (4), the only allowances that could be made in respect of current profits are current year's depreciation under section 10(2)(vi) and current year's additional or extra depreciation under section 10(2)(via). The set off of losses under section 24(2) and allowances in respect of unabsorbed depreciation, both under sections 10(2)(vi) and 10(2)(via), would not enter into the computation under section 15C(3). It is true that when the net result of assessment on the company is taken, there is 'nil ' profit and there might be no occasion at all for the application of section 15C. But, in our view, it does not follow from it that on that ground the benefit of that section can be denied to the share. holders if on a computation of the profits and gains of the industrial undertaking under section 15C(3), the company had made profits out of which dividends had been paid to its shareholders. Where the company has 'nil' profits under its final assessment, the non-application of section 15C is not due to the fact that it made no profits and it was not entitled to the benefit of section 15C(1). But, in view of the overall result of the assessment. there is no need for the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) where depreciation allowance is, under clause (b) of the proviso to clause (vi) of sub-section (2) of section 10, also to be carried forward, effect shall first be given to the provisions of this sub-section. " Sub-section (2) of section 24 deals with " the carry-forward of losses and proviso (b) to section 24(2) sets out the sequence in which the losses carried forward and the depreciation allowance which remains unabsorbed in the previous year are to be allowed. Whether any practical effect may be given to the terms of proviso (b) to section 24(2), in the view which this court has taken in Commissioner of Income-tax v. Jaipuria China Clay Mines (P.) Ltd., is a matter on which we need express no opinion. If on its plain terms proviso (b) to section 24(2) deals merely with priority and does not convert what is unabsorbed depreciation of the previous year which is deemed to be depreciation for the current year into loss " for the purpose of carry-forward ", sub-section (2) of section 24, proviso (b), presents no difficulty in the present case. This court in Jaipuria China Clay Mines' case, held that unabsorbed depreciation of past years cannot be kept out of the accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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